On Tuesday, this Blog briefly discussed the recently released decision of Ohio’s 9th District Court of Appeals in reversing a judgment issued against KNL premised upon a disputed interpretation of the Ohio Consumer Sales Practices Act (“CSPA”). Due to the collaborative efforts of Attorneys from Harpst Ross, Ltd., and Clark D. Rice of Koeth, Rice & Leo Co. L.P.A., Ohio businesses can breathe a little bit easier, knowing that the immense liability to which they are exposed under the CSPA has been reigned in significantly by this milestone decision. The importance of this opinion to the business community merits a more in-depth analysis and examination of the impact it will have on how the CSPA is applied in the future.

The CSPA, codified at Ohio Rev. Code § 1345.01, was originally adopted to protect individual consumers from unfair or deceptive practices by unscrupulous businesses. Specifically, the CSPA prohibits a supplier from committing “unfair or deceptive” acts in a “consumer transaction.” Deceptive or unfair acts are “those that mislead consumers about the nature of the product they are receiving.” For instance, a car dealer that represents to a consumer that the vehicle they are purchasing is a 2013 model year when, in fact, it is a 2010 model year, has engaged in an act which would be classified as deceptive under the CSPA.

In the KNL case, the plaintiffs, Ron and Kathy Price (“Prices”), entered into a contract with KNL Custom Homes, Inc. (“KNL”) to design and construct a custom home. According to the contract, KNL would build the home for $751,386, and be substantially completed approximately eleven months from the time construction began in November of 2005. Although the Summit County Building Department completed its final inspection on February 12, 2007, a disagreement arose between the parties, and the Prices refused to execute a final punch list or release the final installment of their construction loan to KNL in order to complete the project.

In February of 2009, the Prices filed a complaint against KNL alleging, among other things, violations of the CSPA. KNL defended the CSPA claim by arguing that it was barred by the applicable statute of limitations. A statute of limitations is the period within which a party can initiate a legal claim. In the case of an alleged CSPA violation, the statute of limitations for bringing a claim is “two years after the occurrence of the violation” which begins to run from the date of the occurrence of the violation. R.C. 1345.10(C).

After a lengthy trial, the jury returned a verdict in favor of the Prices in the amount of $38,311.62. Pursuant to a provision of the CSPA which allows the trebling, or tripling, of damages and awarding of attorney’s fees, the trial court issued a judgment against KNL on the CSPA claim in the amount of $114,934.86, plus attorney’s fees in the amount of $130,000. What was initially a relatively minor claim of damage ballooned to a liability of more than six times the original amount.

On appeal, the 9th District Court of Appeals disagreed with the trial court’s decision not to dismiss the CSPA claim altogether, ruling that the alleged violations of the CSPA must have occurred prior to the final inspection on February 12, 2007. The Court held that, because the Prices filed their complaint on February 13, 2009, the CSPA violations were barred by the two-year statute of limitations.

While the CSPA certainly serves a valuable purpose, like many laws passed under the auspices of consumer protection, it can be abused by litigious individuals to beat down businesses under the threat of the harsh penalties sanctioned by the CSPA. Given the extreme to which businesses can be held liable under the CSPA, it is imperative that the few constraints the law places on making such claims, such as statutes of limitations, be recognized and followed. Decisions such as the one rendered in this case ensure that both consumers and businesses are able to litigate their disputes on a level playing field by limiting the reach of CSPA claims.